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The word budget can bring with it a scary shock of responsibility. Although living on a lean budget will require more discipline, the payoff of financial freedom and peace of mind down the road is definitely worth it. Here are some simple and effective steps to working your way out of debt and creating a healthy budget.

Organize and Prioritize

Maintaining a healthy budget requires some organization to prevent you from spending randomly and making unnecessary purchases. Knowing what expenses are coming each month will help you to effectively utilize your income.

Begin by listing out predictable expenses. These include:

•Gas and electric

•Rent or mortgage


•Transportation and fuel

•Phone, cable and Internet

•Loans payments

You can then build a spreadsheet in Excel, input the information into QuickBooks or just sketch out a list with pen and paper to stay organized. This will help you prioritize spending and know what to expect for the month.

Building A Better Budget

These costs may vary from month to month, but you should be able to closely estimate how much you will need. Compiling this list might take a little time, but it will provide a fair picture of your total monthly expenses. And being familiar with these costs will help to reduce extra spending.

Ranking Debt

One effective way to begin chipping away at your debt is to rank every amount that you owe in order from highest interest rate to lowest. Begin working on the highest rate loans first. Whenever extra money is available, put it towards paying off the first loan on the list. Once that creditor is paid off, recommends finance specialist Gail Vaz-Oxlade, you can begin working on the next and slowly grow your savings account by putting the payments you would have been making towards savings.

Create an Emergency Fund

Starting an emergency fund is smart and necessary way to protect your budget. Start with $1000 and gradually add to it. This fund will back you up during the unexpected like a giant car repair, losing a job or a medical illness. These crises will happen, so being prepared for them is financially wise because it will keep you from creating new debt as you work out of the old debt. If you experience unexpected bills and don’t have an emergency fund, consider a short-term loan from a company such as in order to help pay off your debts without hurting your credit.

Involve the Whole Family

Another fantastic key towards building a budget that your household can actually live with is to talk about it openly and get everybody involved. Ask your kids to help find ways that your family can cut spending. Sit down for routine family meetings and quickly find out how much everyone spent that day. Being open about your financial plan will help kids to see why things feel tight and encourage them to help out in ways that they can.

With these steps in mind, you can begin paying off debt and expanding your savings account. Taking a hard look at monthly spending will help you cut back. Listing out loans will show what needs to be paid off when. Saving an emergency fund will help you prepare for the future. And letting everyone be part of the process will make the budget more practical and sustainable. Soon your household will be on its way to financial safety.